USD Coin, the industry’s second-largest stablecoin, will now be backed by cash and short-term US treasuries, according to Centre.
According to a recent blog post from the Centre Consortium, USD Coin (USDC) would only be backed by cash and US Treasury notes. In 2018, Boston-based Circle and Coinbase, an American cryptocurrency exchange, launched Centre.
Circle creates USDC, while Centre determines which entities are permitted to create the stablecoin and utilise its API. In March, Visa, for example, announced that it will begin settling transactions in USDC.
Stablecoins are cryptocurrencies that are linked to the value of a fiat currency. They are an important component of cryptocurrency markets because they provide speculators with access to a reliable asset without requiring them to convert back to cash.
In this scenario, USDC is linked to the US dollar. Centre has also stated that these stablecoins are 1:1 redeemable for the currency they are linked to.
However, in July, Circle reported that its stablecoin was only 61 percent backed by cash and financial equivalents, calling this 1:1 backing into question. In this sense, cash can also refer to money market funds, while cash equivalents are short-term securities.
“Mindful of community sentiment, our commitment to trust and transparency, and an evolving regulatory landscape, Circle, with the support of Centre and Coinbase, has announced that it will now hold the USDC reserve entirely in cash and short duration US Treasuries,” Sunday’s blog post reads.
These revisions, according to the firm, will not be reflected in the current backing disclosure, but rather in future attestations done by auditors Grant Thornton.
According to CoinGecko, Circle’s stablecoin has a total market cap of $27.01 billion, making it the ninth-largest cryptocurrency.
Tether’s USDT is the most valuable stablecoin, with a market worth of more than $65 billion.
Tether produced a similar assurance paper confirming their support earlier this month. According to the study, the stablecoin’s cash and bank deposit support was only 10%. In May of this year, that support was 3 percent.
Despite claims of 100% monetary backing, neither stablecoin has a dollar for every cryptocurrency.
This hasn’t been a problem for the market thus far, with both stablecoins rising by leaps and bounds over the last year.
